5 Things I've Learned from Lifestyle Creep

Aug 02, 2021Building a Budget

January 2019, the year Tri-Cities, WA was hit with a massive snowstorm that lasted for several months. If you are from Eastern Washington words like “Snowmageddon or Snowpocalypse” should be an easy identifier. In weeks prior to the snow we also moved into our second home, now most people may call your second home your “forever home” but I am not that bold. What I can say is we boldly upgraded, we doubled in square-footage, added a second floor, we tripled in bathrooms and living rooms and added a bedroom. Now, you have an idea of our first home right? In the eyes of a real-estate agent, it was often referred to as “adorable or cozy”. The reason for the move was not only did we quickly outgrow our little home. Our family was growing and the home that was once sufficient for just the two of us needed to accommodate comfortably for three. We also found ourselves caught in a lifestyle creep. Lifestyle creep is the tendency to increase your spending as income increases. We didn’t realize it then because the fluctuation of our spending was normal and it never hindered our daily living. Now, with doubling in square-footage you can imagine we easily doubled our once cozy mortgage payment. At this time, my Husband worked in construction specifically concrete. Let me remind you when I say we always financially anticipated for the winter months but this was living in our cozy home budget. Where my Husband’s income could cover our entire expenses and more. Then there was my income that was just extra. However, nothing could have prepared us for the snowfall that was about to happen and the lack of cash flow coming in shortly after moving in where our entire bill set doubled. This is when we had to get serious about budgeting.

With that said, here is what I’ve learned:

1. We could no longer live on “the cozy home budget.”

   We knew our expenses were increasing; we were signing documents left and right agreeing to all the terms. We were also activating our new services giving us projections from the previous year, which were substantially more than our utilities in years past. It came as no surprise but shortly after living in our new bills, we knew we could no longer spend in excess (and no longer lifestyle creep) as if we were still living in the cozy home budget. My income was no longer just extra; it was no longer being dumped in savings or overspent at Costco and Amazon. My income now mattered to the contribution to our expenses.

2. Even though on paper the numbers made sense, the calculations told us we could afford our new projected bill set its not realistic.

   If you are in a position, where you are thinking to extend or might be on your way to over extend a budget you’ve been accustomed to for an extensive period of time. It is important to hone in on your emergency fund and paying yourself first. To accumulate for all the uncertainty life may bring. You cannot pin point when to expect things such as car repairs, necessary home improvements and repairs, unexpected medical emergencies or even job loss. We were prepared for the winter months to be a slow time for concrete, but we were not prepared for more than a quarter of the year for work to come to a complete halt. 

3. Budgets need some TLC, a continued adjustment and that’s OK!

   Maintaining and adjusting a budget allows you to accurately track changes in your spending patterns in real time (like lifestyle creep, for example) that you wouldn’t notice otherwise. You can use any budgeting method that works for you (apps, spreadsheets, notebooks or envelopes), as long as you’re able to reliably capture and record your monthly spending. It also gives you the opportunity to create a framework that allows you to set up modifications to reach your financial goals.

4. Allocating a spending limit for gifts/parties/holidays can bust our budget if we do not plan purchases well in advance.

   Our social life, friends, family and relationships are very important to us and with all the parties we attend, we host and around the holidays, it can get really expensive. We put aside money starting in the fall and accumulate for holidays and parties that we plan to host and cater. Once we reach our desired amount for those occasions, we only spend that amount. For all other parties that require gifts (baby showers, birthdays, engagements, bridal showers, you name it we are going! Based off occasion type determines the dollar amount spent. The way we organize a budget for each gift is once the invitation has been received, money will be put aside in that month. That way we can avoid any bombardment of spending in excess.

5. Nothing beats the joy of lowering or getting rid of a monthly bill.

   It is very easy to add more monthly bills to your budget but not the same could be said of getting rid of them. Self-awareness is the key to countering lifestyle creep. Just because your income grows does not necessarily mean your spending habits have to. Clear goals of lowering or getting rid of a monthly bill, a tailored adjustable budget and a strong focus on paying yourself and building an emergency fund first will allow you to enjoy more of your money in the long term. Life will always have stressors but your budget doesn’t have to be one.

Now, that we just finished our mid-year 2021 financial checkup it makes me proud, with all our expenses for the entire year. Considering how difficult this last year has been in a midst of a worldwide pandemic, while adding another little to our family. I’m glad we were forced into a budget; we have stuck by it and while it gives us peace of mind it was also a clear eye-opener. 

Adrianna Hammitt

Financial Education Coordinator | HAPO Community Credit Union